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Danielsson, Jon; James, Kevin R.; Valenzuela, Marcela; … - London School of Economics (LSE) - 2014

This paper evaluates the model risk of models used for forecasting systemic and market risk. Model risk, which is the potential for different models to provide inconsistent outcomes, is shown to be increasing with and caused by market uncertainty. During calm periods, the underlying risk...

Persistent link: https://www.econbiz.de/10011163510

Capturing the time-varying drivers of an epidemic using stochastic dynamical systems

Dureau, Joseph; Kalogeropoulos, Konstantinos; Baguelin, Marc - London School of Economics (LSE) - 2013

Epidemics are often modeled using non-linear dynamical systems observed through partial and noisy data. In this paper, we consider stochastic extensions in order to capture unknown influences (changing behaviors, public interventions, seasonal effects, etc.). These models assign diffusion...

Persistent link: https://www.econbiz.de/10010746158

Copula-based dynamic conditional correlation multiplicative error processes

Bodnar, Taras; Hautsch, Nikolaus - Center for Financial Studies - 2013

We introduce a copula-based dynamic model for multivariate processes of (non-negative) high-frequency trading variables … multiplicative error model we map the resulting residuals into a Gaussian domain using a Gaussian copula. Based on high … proposed copula-based transformation is supported by the data and allows capturing (multivariate) dynamics in higher order …

Persistent link: https://www.econbiz.de/10010958506

Efficient iterative maximum likelihood estimation of high-parameterized time series models

Hautsch, Nikolaus; Okhrin, Ostap; Ristig, Alexander - Center for Financial Studies - 2014

We propose an iterative procedure to efficiently estimate models with complex log-likelihood functions and the number of parameters relative to the observations being potentially high. Given consistent but inefficient estimates of sub-vectors of the parameter vector, the procedure yields...

Persistent link: https://www.econbiz.de/10010958791

Dependence Structure and Extreme Comovements in International Equity and Bond Markets

Garcia, René; Tsafack, Georges - Centre Interuniversitaire de Recherche en Analyse des … - 2009

-switching copula model that includes one normal regime in which dependence is symmetric and a second regime characterized by asymmetric …

Persistent link: https://www.econbiz.de/10005052205

Portfolio credit risk of default and spread widening

Zhao, Hongbiao - London School of Economics (LSE) - 2011

consistent framework. Credit spreads are modelled by geometric Brownian motions with a dependence structure powered by a t-copula …

Persistent link: https://www.econbiz.de/10010745286

Balance sheet capacity and endogenous risk

Danielsson, Jon; Song Shin, Hyun; Zigrand, Jean-Pierre - London School of Economics (LSE) - 2011

Banks operating under Value-at-Risk constraints give rise to a welldefined aggregate balance sheet capacity for the banking sector as a whole that depends on total bank capital. Equilibrium risk and market risk premiums can be solved in closed form as functions of aggregate bank capital. We...

Persistent link: https://www.econbiz.de/10010884614

VaR-implied tail-correlation matrices

Mittnik, Stefan - Center for Financial Studies - 2013

Empirical evidence suggests that asset returns correlate more strongly in bear markets than conventional correlation estimates imply. We propose a method for determining complete tail-correlation matrices based on Value-at-Risk (VaR) estimates. We demonstrate how to obtain more effi cient...

Persistent link: https://www.econbiz.de/10010958605

Accurate Value-at-Risk forecast with the (good old) normal-GARCH model

Hartz, Christoph; Mittnik, Stefan; Paolella, Marc S. - Center for Financial Studies - 2006

A resampling method based on the bootstrap and a bias-correction step is developed for improving the Value-at-Risk (VaR) forecasting ability of the normal-GARCH model. Compared to the use of more sophisticated GARCH models, the new method is fast, easy to implement, numerically reliable, and,...

Persistent link: https://www.econbiz.de/10010958670

Systemic risk spillovers in the European banking and sovereign network

Betz, Frank; Hautsch, Nikolaus; Peltonen, Tuomas A.; … - Center for Financial Studies - 2014

We propose a framework for estimating network-driven time-varying systemic risk contributions that is applicable to a high-dimensional financial system. Tail risk dependencies and contributions are estimated based on a penalized two-stage fixed-effects quantile approach, which explicitly links...

Persistent link: https://www.econbiz.de/10010958802

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